2017.04.2603:41:00UTC+00Oil in Global Economy Series: Iraq Poses Biggest Threat to Oil Deal Extension

Can there be an extension to the oil production curb deal agreed in last November to reduce production by almost 1.8 million barrels per day, when the second-largest producer Iraq is considering further expansion of production?

We, at FxWirePro, do not know the answer to that question and it can only be answered by the OPEC ministers when they meet in the OPEC headquarter in Vienna on 23rd May. Last year, the OPEC was able to defy the market expectations and was able to not only agree to a 1.2 million barrels worth of production cuts but it was able to bring in 11 non-OPEC participants to cut production by another 0.6 million barrels per day. So the benefit of the doubt is still in favor of the OPEC.

However, it is important to note that back in November last year, Iraq was very much opposed to the production cuts and called for its exemption from the deal, which was denied. Its action this year, certainly pose doubts over an extension. Iraq has started work on the third and final phase of the Halfaya oil field expansion, with the goal to double production capacity next year. Currently, the oil field is producing about 200,000 barrels per day and its capacity is set to double to 400,000 barrels per day in 2018. In March, Iraq produced 4.46 million barrels per day, higher than the agreed level of production n last November and the country plans to expand its production to 5 million barrels per day by the end of this year.